Benefits of investing in DJW

• A diversified portfolio numbering around 50 companies.

• A Board and Investment Committee with extensive investment skills and practical business experience.

• No upfront fees or commissions to third parties - transaction costs will be borne when buying and selling Djerriwarrh shares through a stockbroker.

• Low managements fees - 0.44% for the financial year to 30 June 2018

• Effective capital management, including: a dividend reinvestment plan which allows investors to cost effectively put their dividends back into the Company; from time to time, a share purchase plan which allows shareholders to top up their holdings with no brokerage and sometimes at a small discount to the market price; and activation of the on-market share buy back program which gives the Company the flexibility to buy back shares at appropriate times, particularly if the shares start trading at a discount to their Net Asset Backing

• Simple taxation structure for shareholders because Djerriwarrh as a separate legal entity pays tax just like any other company. However the tax is small because companies receiving fully franked dividends do not need to pay any additional tax on the franked dividend. These fully franked dividends are passed straight through to shareholders in February and August of each year. Certain Australian shareholders can also claim a tax benefit where the dividend is sourced from a LIC capital gain.

• An active approach to keeping shareholders informed about the Company's activities and performance, including yearly and half yearly profit announcements, regular shareholder briefings and access to all company announcements, including Net Asset Backing announcements.

About the Fund

Djerriwarrh aims to provide shareholders with attractive investment returns through access to a steady stream of fully franked dividends and enhancement of capital invested.  

In this regard the primary goals are:

1. to pay an enhanced level of fully franked dividends; and
2. to provide attractive total returns over the medium to long term.

Listed Investment Companies (LICs) provide exposure to a diversified portfolio of investments on behalf of their investors. LIC's are like any other company ie. BHP or Woolworths listed on the Australian Securities Exchange (ASX). They have their own separate boards, own governance structures and are required to report their financial results to the market every six months.

LICs are closed-end vehicles, meaning they do not continually issue new shares or cancel shares as investors join and leave the fund. Instead, investors buy and sell to each other through shares listed on the ASX.   

Occasionally, an LIC may issue new shares to increase the size of the portfolio through dividend reinvestment plans, share purchase plans and rights issues. They may also buy back and cancel shares in order to reduce the size of the fund, although this occurs less frequently. These decisions are made at the discretion of the Board. The closed-end structure typically allows the fund manager to concentrate on investment selection without having to factor in the possibility of money coming into or leaving the fund. This capital stability assists Djerriwarrh in taking a long-term approach to investing.

An LIC's share price can on occasions trade at a different price to the underlying value of portfolio. Because it actually has a set amount of shares on issue, the share price can sometimes trade at a premium, and sometimes at a discount depending on the demand from buyers and sellers within a market.

There are many LIC's listed on the ASX with different investments styles and objectives. Djerriwarrh seeks to provide shareholders with an enhanced level of fully franked dividends and to provide attractive total returns over the medium to long term.

How we invest your money

Djerriwarrh is a listed investment company investing in Australian equities with a focus on stocks where there is an active options market. The Company uses exchange traded options to enhance income return to investors. The Company pays out a high percentage of profits as fully franked dividends. Dividends are able to be sourced from current year profits, retained profits and profits from the sale of investments.

One of the key components in the Company's ability to pay a high yield is its approach to selling options over part of its investment and trading portfolio. This generates current income from the option premium Djerriwarrh receives for selling the options.

The amount that the Company receives from selling options depends on a number of factors:

• level of volatility in share price anticipated for the underlying stock 

• level of the option exercise price and particularly how far it is from the current share price. 

• time to expiry, i.e. how far the option has to run. 

• level of interest rates, the lower interest rates are, other things being equal, the lower the option premium received. 

• the percentage of the portfolio over which we are prepared to sell options. 

In an environment where the Company believes the market is more likely to rise, then we would tend to have a lower level of the portfolio covered by options to give the company more exposure to any lift in the capital value of our investments.

The majority of options are written against securities held in Djerriwarrh's investment portfolio. However in the investment portfolio, Djerriwarrh does not sell options with the objective of sale of the underlying shares. It is our preference for the options to either lapse at expiry or prior to exercise to seek to buy the options back and sell new options further out and preferably at a higher exercise price. From time to time, where the share price increases strongly, we do take decisions to allow the shares to be exercised when we have formed the view that it is in the shareholders' best interest to allow that to occur. Gains on disposals of investments upon the exercise of such options, after applicable tax, are taken to the Asset Realisation Reserve. These gains are available for distribution to shareholders.

In the trading portfolio (which usually comprises between 5 to 10 percent of the total portfolio) options are written as part of the strategy to sell or close out securities for a short-term profit.